Book excerpt: The Billion Dollar Start-Up

HEXO
Hexo president and CEO Sébastien St-Louis.
Editor's Note

Hexo co-founders Adam Miron and Sébastien St-Louis, along with writer Julie Beun, recently reflected on their journey creating the local licensed cannabis producer in a soon-to-be-released book, The Billion Dollar Start-Up. The following is an excerpt from that publication.

Brick-and-mortar buildings. An actual honest-to-God licence to produce cannabis. A knowledgeable master grower in Louis Gagnon. And staff.

After months of uncertainty and sleepless nights, it looked like Hydropothecary was in business.

While it seemed like the company was starting to find success, the one thing Seb and Adam didn’t have was the one thing they needed as much as they needed each other: money.

It was apparent their cash flow was more like a cash drought and would continue to be unless they could raise investment capital in an ongoing way. They had pretty much exhausted all private avenues for raising money, aside from selling their houses or raiding their piggy banks. They needed a bigger solution, something sustainable that would see them through to their first sales, whenever that might be.

Hexo book coverBy reputation, they knew about Bay Street. Who didn’t? Despite his experience in finance and commercial banking, Seb wasn’t familiar with capital markets and how they worked. Sure, he’d studied the theory in university, but that’s all it was to him — a theory. He was about to be introduced to its reality, through a tall, fit, and a little too-silky sales guy named Rene.

Rene knew Bay Street and, according to him, he knew the upper echelon.

By the time their first meeting was set with Rene, Seb was ready. He’d written, reworked, and refined an investor deck that outlined their immediate ask for a $1 million injection. It wasn’t grandiose, but it was polished and concise.

Rene arrived on time and, after a few courtesies, they sat down at Adam’s dining-room table.

“So, what do you have for me?”

This was the only cue Seb needed. He immediately went into pitch mode, shooting at Rene rapid-fire facts and numbers from memory as if from a semi-automatic, while Adam interjected where needed. In retrospect — several years and a billion-dollar company later — a million dollars is a laughably pitiful ask. But at that time, their hands in empty pockets, it was the magic number as far as they knew. Eventually Seb wound down.

“Sorry. Not interested.”

Rene’s words were like a bucket of ice water to the face. But he was just being honest. He threw the printed deck on the table. He paused to look at each of them in turn.

“What would you boys do with $20 million?”

The truth is, a $1 million raise wasn’t juicy enough for him, nor would it be for anyone else on Bay Street for that matter. Between seven and eight per cent of cash raised would go to brokers and, since Rene couldn’t raise $20 million on his own, he needed the ask to be big enough to earn a decent chunk of change. On $20 million, $1.6 million would go to the brokers, and he would earn perhaps $100,000 of that.

Almost in unison, Seb and Adam swallowed. That was a much bigger deal than they envisioned. That kind of cash would mean . . . well, it would mean an accelerated and far wider-ranging plan. It would also mean that, if nothing else, they had room to breathe.

Rene rose to leave. “I’ll tell you what. You think about it, and if you come up with a good plan, I’ll bring you to Toronto to meet some bankers on Bay Street. When can you have it ready for me?”

Seb laughed out loud. “Give me 30 minutes.”

As soon as Rene left, they got right to business. They were dealing with orders of magnitude this time: what they could do with $1 million was nothing like what they could achieve with 20 times that number. A few hours before dawn, Seb finally left for home. But not to sleep.

“I worked through the night. I had my spreadsheet in front of me and was going through thousands of data points,” he recalls. “We had been working on financial models for a few months and it was a manic process to make it much bigger.”

The next morning, he bolted up Adam’s dilapidated stairs, leaping over the missing third step, half an hour before Rene was due to arrive. Barely saying hello at the front door, he ran downstairs to the office, shouting over his shoulder, “Come on, I’ve changed the plan again. I need to show you.”

Back at their four-by-three-foot whiteboard, Seb sketched out his strategy. It was all there — rapid expansion of the facilities, a much bigger 36,000-square-foot greenhouse, an army of salespeople working directly with doctors, aggressive growth, and an accelerated timeline. It was a hell of a proposition, and the first time they deviated from their plan to have a family-owned, $20 million company. The returns would be even more impressive, but would Rene be dazzled, too?

At the appointed time, their guest arrived and they ushered him downstairs. For the next half hour, Seb went through the game plan, stopping every now and then to answer a question or expand on a point.

“So, that’s it. That’s what we’ve come up with,” he said finally to Rene.

Rene grinned. He liked what he saw. He could sell this. Hell yeah, he could.

“Let’s go to Bay Street. You boys own suits?”

Billion Dollar Start-Up: The True Story of How a Couple of 29-Year-Olds Turned $35,000 into a $1,000,000,000 Cannabis Company is scheduled to be released Feb. 2.